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Monthly Archives: July 2015

Governor Walker initially submitted a budget bill on February 3, 2015, which, among other things, proposed removing the Worker’s Compensation Division from the Department of Workforce Development (DWD) and moving administrative law judges and the judicial functions to the Department of Administration – Office of Hearings and Appeals (DOA) and the remaining staff and day-to-day functions to the Office of Commissioner of Insurance (OCI). In late May 2015, the Joint Finance Committee revised the bill to include the reassignment of the judges and the judicial functions to the DOA but rejected the proposal to move the staff and remaining functions to the OCI, proposing instead to keep them at the DWD. Additionally, the revised bill called for the work comp judges to spend 90% of their time at DOA adjudicating work comp cases, leaving the remaining 10% of their time for them to preside over other matters handled by DOA.

On July 12, 2015, Governor Walker enacted the 2015 Budget Bill which included the transfer of eighteen worker’s compensation administrative law judges and all adjudicatory functions to the DOA. The budget also stated that no less than six judges and two support staff positions should remain at the DWD to handle the day-to-day functions. As suggested by the Joint Finance Committee, the remaining staff and day-to-day functions (including claims management and insurance regulation) will remain at the DWD. However, Governor Walker used his line item veto to strike the sentence proposed by the Committee which called for 90% of the judges’ time to be spent on work comp cases, stating as an explanation that the DOA should have control over what cases the judges in their department preside over. These changes are set to take place on January 1, 2016.

It is currently unclear whether the six judges that will remain at the DWD will be able to preside over settlement conferences or whether that function will be transferred to the DOA. It is also unclear whether the eighteen judges that are being transferred to the DOA will be the only judges to handle worker’s compensation hearings, or whether other judges that are currently at the DOA will be cross-trained to handle worker’s compensation cases as well. This could mean an influx of new judges presiding over worker’s compensation hearings. A committee is currently forming to aid the DOA and DWD in such decisions and to help make the transfer of the judges as seamless as possible. We will continue to supply you with up-to-date information as this process progresses.

While the recent budget bill is considered to have effected position changes only with no real substantive changes made to our existing worker’s compensation system, there are other proposed legislative bills currently being circulated which call for significant changes to the Act including altering the statute of limitations, eliminating minimum permanency ratings, enacting a medical fee schedule and allowing civil action against employers for abusive work environments. While none of these proposed bills have been submitted to the Legislature for review at this juncture, we will continue to monitor all proposals and will provide ongoing updates once/if any are presented to the Legislature.

Please feel free to contact Chelsie Springstead by email at cspringstead@lindner-marsack.com, or any member of the Lindner & Marsack Worker’s Compensation Defense Practice with any questions.

The U.S. Department of Labor (“DOL”) has issued new guidance reiterating its focus on misclassification of employees as independent contractors and warning employers that “most workers are employees.”

The DOL has asserted that the purpose of its guidance is to provide clear direction to employers regarding the classification of workers as independent contractors. It asserts that employers should apply the multi-factorial “economic realities,” test, which focuses on whether the worker is truly in business for him or herself. Under this test, employers should consider and weigh the following factors: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on his/her managerial skill; (3) the extent of the relative investments of the employer and the worker; (4) whether the work performed requires special skills and initiative; (5) the permanency of the relationship; and (6) the degree of control exercised or retained by the employer. The DOL asserts that all of the factors should be considered and weighed together in each case, and that no one factor, such as the control factor, is determinative.

While the guidance does not announce a new standard to be applied in analyzing whether a worker is an employee or independent contractor, it asserts that the application of the economic realities test should be guided by the Fair Labor Standard Act’s definition of the term “employ.” The FLSA provides an expansive scope of the employee-employer relationship by broadly defining the term “employ,” to mean “to suffer or permit to work.” Applying the economic realities test to the broad scope of the employee-employer relationship, the DOL concludes that most workers should be classified as employees under the FLSA.

In light of this guidance, employers should carefully examine their classification of workers to prepare themselves for DOL audits and protect themselves from costly misclassification litigation and liability. Indeed, if it is found that an employer misclassified employees as independent contractors, the financial consequences could include the following: liability for employment withholding taxes, failure to pay tax penalties, minimum wage, overtime compensation, unemployment insurance, workers’ compensation, and ACA penalties for failing to provide minimum essential health-care coverage.

As directed by President Obama in March 2014, the Department of Labor (DOL) has issued a proposed rule regarding the Fair Labor Standard Act’s overtime regulations.

The rule focuses primarily on updating salary and compensation levels. It proposes increasing the standard salary threshold level for exempt employees from $455 a week to approximately $970 a week. This increase would set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers (nationwide) in 2016. While the standard salary level was set at the 20th percentile of weekly earnings for full-time salaried workers in 2004, the DOL states that an increase is necessary to fully account for the simplified duties test that was created in the DOL’s 2004 changes.

The rule also proposes salary increases to the “highly compensated employee” exemption. Currently, the regulations provide an exemption for employees if they earn at least $100,000 in total annual compensation and customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee. The DOL is proposing increasing this figure to $122,148, which would set the salary standard at the 90th percentile of all full-time salaried workers.

Furthermore, the DOL has proposed a mechanism for annually updating the salary and compensation levels going forward. It is considering and is seeking commentary on two possible methodologies: (1) annually updating the thresholds based on a fixed percentile of earnings for full-time salaried workers, or (2) annually updating the thresholds based on changes in the Consumer Price Index for all Urban Consumers (CPI-U).

Despite these drastic changes, the DOL has included a silver lining for employers. The DOL has proposed allowing non-discretionary bonuses and incentive payments, such as bonuses tied to productivity and profitability, to count toward 10% of the standard weekly salary level of $970, for the executive, administrative, and professional exemptions. In order to include the bonuses within the salary, the bonuses would have to be non-discretionary and employees would need to receive the bonuses more frequently than annually (i.e., monthly or quarterly, rather than a yearly “catch-up” payment).

While the DOL is not proposing any specific changes to the standard duties tests, it is seeking commentary to determine whether, in light of the salary level proposal, changes to the duties tests are necessary.

Upon publication of the proposed rule, the public is encouraged to provide commentary through the online portal at www.regulations.gov under Rule Identification Number 1235-AA11. After considering the comments, the DOL will make revisions to its rule and will issue a Final Rule sometime thereafter.

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